14 Passive Income Ideas with Unlimited Potential

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Do you want to earn passive income without having to put in much effort? Are you looking for passive income streams to make extra money? If so, then you should check out these passive income ideas.

There are many ways to generate passive income. Some people prefer to invest their money while others choose to start an online business. In this article, I am going to share with you some of the best passive income ideas that will change the way you think about earning money.

What is passive income?

Passive income is a type of income where you get paid for the work you did in the past. It doesn’t require much consistent effort on your part. All you have to do is sit back and watch the money roll in. In contrast, active income requires your active or even daily participation. Basically, money isn’t generated unless you exchange your time.

>>> Read 50+ active income ideas to grow your wealth

The term “passive” means working without doing anything — it doesn’t require much effort at all. But there are many different kinds of passive income streams: real estate rental properties, online businesses like eCommerce stores, blogs, digital products, and affiliate marketing offers. There are also other ways to produce passive income such as investing in stocks, bonds, mutual funds, annuities, life insurance policies, and government securities.

Keep in mind the goal of a passive income strategy is to earn money while you go about your day.

How Much Passive Income Can I Earn?

You can make as much or as little passive income you want, but it takes time and effort to do so. You’ll need to spend initial hours, effort, and capital to create a source of passive income.

For example, you may spend a lot of time initially writing a book that’s then sold on Amazon for years to come and requires little effort as a passive income source. Although there may have been significant activity in the beginning the future income stream is generated passively.

There is some debate on what constitutes passive versus active income. But the truth is unless you have a trust fund that periodically sends you money, then most passive income streams have some required active participation.

Choose a passive income idea and do what you can to see if it can turn into a viable stream of income. 

Passive Income Ideas involving the Stock Market

With the following streams of income, you’ll need to have a brokerage account to make money through stock investments. Find the best brokerage account here.

1. Dividend Paying Stocks

Start investing in stocks that pay dividends. Dividends are profits that companies payout to shareholders in the form of cash or stock. They are usually paid at the end of each quarter. They are usually considered to be good investments because they provide regular income for investors. 

Although what tends to make the news are growth stocks that increase in share price, dividend stocks are less volatile. Generally, you want to diversify your investment portfolio with dividend-paying stocks.

2. Exchange-traded funds (ETFs) and Index Funds

Instead of purchasing individual stocks, you can buy funds that hold dividend-paying stocks. With index funds, you get a basket of companies with the goal of mirroring the performance of a specific index. For example, you can buy an index fund that mirrors the S&P 500. Essentially, you own a piece of each one of those 500 companies in that index. With dividend-paying index funds, you specifically choose the fund with stocks that pay dividends.

Find best index funds using M1 Finance.

3. Interest income from Bonds

Lend money to corporations or the government. You are able to do this through bonds which are considered safer than stocks. However, due to their lower risk profile, you’re returns are generally lower. For example, a government bond may give you a 5% annual return compared to an investment in stocks that could return 10% during that same period. 

As part of a well-diversified portfolio for income, you may want to invest a portion into bonds.

Bank Accounts as Passive Income Opportunity

Now, let’s discuss other ways to earn money passively using traditional accounts offered at banks and credit unions. 

4. High-yield savings accounts

If you have money in a savings account, then you’re investing even if that return is minuscule. Choosing to save your money into a high-yield savings account will grow your money faster. Most HYSA are offered by online banks. They pay interest on the money you have in your savings account which is then added to your balance.

High-yield savings accounts offer interest at a much higher rate than the national average. For example, you may get a 1% interest rate with an HYSA compared to a .10% through a traditional financial institution. 

5. Certificates (CDs)

Having significant amounts of money in a savings account is a good thing for short- and mid-term goals, but you may want to consider using a certificate of deposit or CDs to have that money earn more for you. Another passive income idea is using a CD ladder strategy where you place money into various certificates with different maturity dates. Generally, certificates of deposit earn a higher rate compared to regular savings accounts and at times higher than HYSA. 

With CDs, you can access the money at maturity and get a guaranteed return that can be paid to you or compounded into the principal amount.

Passive Income Options with Real Estate

For many real estate investing requires being an active landlord with responsibilities. It’s not as passive as many consider. The following can help you passively earn in the real estate markets.

6. Rental Property

You may have looked into buying rental properties to build passive income. Owning property as part of a long-term income strategy can be a reliable source of rental income. However, they often do come with stressors like unruly tenants and the high cost of maintenance. 

But there are many who share that owning multiple units, low mortgage rates, cash-flow positive, and using rental property management companies can reduce stress and limit active participation.

Learn how to house-hack your way to your first rental property.

7. Short-term Rentals

Don’t have the money to buy a separate rental property? Consider renting unused space on Airbnb or hosting travelers. Sure, it’s a bit more active but if you enjoy the company of others and have spare bedrooms, it may be an enjoyable way of earning “passive” income for a period of time. 

Additionally, you’re not limited to renting out a bedroom. Many others rent out their backyard, driveway, parking spaces, garages, and basements. 

8. Real Estate Investment Trust

This belongs to “investing in the stock market”, but it might be better to think of this as a passive income source involving real estate. Don’t want to own investment property? Consider owning REITs instead.

REITs are companies that own income-producing properties, such as shopping centers, office buildings, hotels, apartment complexes, and industrial parks. They are publicly traded corporations that pay out most of their earnings in dividends rather than share buybacks.

Passively Invest with Businesses and Projects

9. Peer-to-peer Lending

Peer-to-peer lending companies like Prosper and Lending Club enable you to invest in loans. Think of peer-to-peer lenders as alternatives to banks. They match investors to borrowers through a proprietary platform. As a “lender” you can earn more compared with a high-yield savings account.

10. Silent Business Partner

Instead of running a business, you can invest in companies and earn passive income through business profits. If you have significant assets or are considered a high-net-worth person and accredited investor, you may have the opportunity to invest in private equity funds.

But for many people, investing in a family or friend’s business venture with an agreement on a share of profit might be more common. 

Semi- Passive Income Options

The following can be considered passive after a considerable amount of time invested and work effort. I like to think of them as semi-passive income.

11. Blogging

A good way to build passive income is to start a blog. As your traffic grows, you can earn income in multiple ways from advertisements, affiliate links, sponsored posts, and your own digital products too.

Keep in mind, it does take time to grow an audience but once you find your niche topic, the amount of time you spend may be significantly reduced. It can be a solid source of income for years to come especially through affiliate marketing.

Learn how to start a blog to make money here.

12. Licensing

If you enjoy taking photos and videos, consider licensing your images for other people to use. Many businesses use stock images and your photos can become a residual income source for years to come.

Essentially, your images are digital products you sell and license. Learn the 5 best places to sell stock photos online for extra income.

13. Publishing

Do you enjoy writing? Then, turn your words into a book and self-publish them on Amazon. After your upfront investment in time, your published books can turn into reliable sources of extra income. 

Learn how to self-publish your own book here.

14. Youtubing

Okay, this isn’t really passive because you have to film, edit, and publish videos consistently. However, once your videos are published, they can continue to earn money with unlimited income potential. You’ll earn money through ads that play in your channel along with earning from affiliate links or even giving viewers the ability to buy physical products can become a good source of passive income.

Learn how to start a Youtube channel here.

As you can see from this list, there often is some type of upfront investment required with any passive income opportunity. You either must have the time or money. If you don’t have extra money to invest, consider active income sources that enable you to earn money using your time that can then be used to invest to make money passively.

Lastly, I want you to understand that there are many online marketers who will sell you the dream of passive income. Understand as a business owner, you’ll be actively involved and may spend a significant amount of time running your business. If you’re looking for a business model that doesn’t create more work for you, then re-read this list and create your own passive income strategy.

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